Monday, February 29, 2016

Employers Take Aim to Curb High Cost of Pharmacy Benefits

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With the availability of expensive new specialty drugs and a rise in the use of compound drugs, employers are facing a rapid increase in prescription drug spend that makes it more difficult to control rising health care costs. In response, employers are taking specific action now and over the next three years to rein in prescription drug spending, according to experts at global professional services company Towers Watson (NASDAQ:TW).

“Although pharmacy represents approximately 20% of employer-sponsored medical benefits** costs, it is increasing at a rate that accounts for roughly half of medical cost inflation*** and should be a top priority for employers,” according to Eric Michael, U.S. central division pharmacy leader for Towers Watson. “The price, utilization and delivery of specialty prescription drugs, many of which require special handling or delivery, are a top pain point for employers. Frustrated by their lack of success in controlling these growing costs, employers are beginning to consider new aggressive approaches.” Examples of specialty drugs that are driving up cost include treatments for Hepatitis C, cancer and arthritis.

The 20th Annual Towers Watson/NBGH Best Practices in Health Care Employer Survey of 487 large U.S. employers confirms more than one-quarter (26%) of employers are addressing specialty drug cost and utilization in their medical plan today, in addition to the variety of tactics focused on the pharmacy benefit directly. This number is expected to triple in three years. Significantly, 53% of employers have added new coverage and utilization restrictions for specialty pharmacy, such as requiring prior authorization or limiting quantities based on clinical evidence; another 32% are expected to add the restrictions by 2018.

“Because of the complexity involved in delivering specialty drugs, related costs are often paid through the medical benefit, rather than the pharmacy benefit. When this is the case, employers look for data and reporting from the health plan to determine usage patterns to help them estimate their financial exposure,” added Michael.

The survey also found more employers plan to exclude inappropriate compounds from their benefit coverage, with 39% having done so and another 24% expecting to do so by 2018. According to Carmelina Rivera, U.S. west division pharmacy leader for Towers Watson, “compounds are prescribed by physicians, but prepared by pharmacists who mix or adjust drug ingredients to customize a medication for a specific patient. Given that the compounding process results in higher cost and their use may not be FDA-approved in compound form, health insurers increasingly will not cover them.

“Left unchecked, pharmacy costs will continue to soar, creating an urgent need for employers to reevaluate their pharmacy plans and benefits to include maximizing use of generic drugs, and develop clear policies on the use of specialty and compound drugs. The challenge is to prudently manage pharmacy costs while enabling employees to access effective and affordable treatment,” said Rivera.

About the Survey

The 20th Annual Towers Watson/NBGH Best Practices in Health Care Employer Survey tracks employers' best practices and the results of their efforts to provide and manage health benefits for their workforce. The report identifies the actions of high-performing companies, as well as current trends in the health care benefit programs of U.S. employers with at least 1,000 employees. The survey was completed by 487 employers in June and July 2015. Respondents collectively employ 15.1 million full-time employees, have 12.0 million employees enrolled in their health care programs and represent all major industry sectors.

Thursday, February 25, 2016

Reference Pricing: "Net" Invoice Cost for Top Selling Generic and Brand Prescription Drugs (Volume 107)

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It's impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

-- Tip --

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Tuesday, February 23, 2016

Economists Debate: Fight With or Adapt to Rising Drug Prices?

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Rising drug prices, the effect on the healthcare system, consumer push-back, and possible solutions were hotly debated during a panel at the 2016 National Health Policy Conference hosted by AcademyHealth in Washington, DC.

The discussion, High Cost Drugs: Where Regulations Meet Opportunities, was moderated by Tricia Neuman, PhD, senior vice president of the Kaiser Family Foundation (KFF) and director of the Foundation’s Program on Medicare Policy and its Project on Medicare’s Future. She was joined by 2 health economists and Lynn Quincy, director, Health Care Value Hub, a policy group at ConsumersUnion, funded by the Robert Wood Johnson Foundation.

“Drug costs are projected to rise at a fairly rapid pace, with a steep cliff,” said Neuman. Sharing research data generated by the KFF for the period 2013-2014, she said that drug prices are the fastest growing portion of health spending, with specialty medications leading the way. The Foundation’s study showed a 9-10% rise in the annual health spending on drugs, with a 10% increase in retail drugs as a share of the national health spending and 19% increase in spending by employer-based national health plans.

But what has most caught people’s attention, Newman said, is Medicare outpatient drug spending, which till 2014 was steady, but has been on the rise of late. “Sovaldi had an unanticipated impact on Medicare Part D spending rather than the projected Medicaid spending,” she said. “Agreed that the drug has long-term benefits, but we have a short-term issue at hand,” Newman added.

These high prices translate into increases in health plan deductibles and premiums. A consumer survey conducted by the Foundation found that 73% of the population deem prescription drug prices unreasonable and 74% of the surveyed population primarily blame the drug manufacturers for the high costs, ignoring the other players in the game.

The Consumer Expectation

Agreeing with the statistic, Quincy said that while consumers have faith in the value of pharmaceutical innovations, “The fact that more than 50% of Americans take prescription drugs regularly…so prices are top-of-mind for consumers.”

She listed a number of downstream effects of the high drug prices:

1. Patients do not follow the doctor’s prescription
2. Patients procrastinate seeking care
3. Patients avoid filling out or refilling prescriptions
4. Patients cut back on daily requirements to afford taking medications

Quincy offered a few solutions to help ease some of the issues:

1. Immediate financial solutions for patients. A few states are already in the process of adopting these changes:
a. Cap monthly out-of-pocket cost and avoid front-loading by spreading the overall cost of care across the entire year. This, however, does not address the underlying reason of high drug cost.

2. Increase pricing transparency. Make data available on what payers negotiate for drug prices with manufacturers, as is common practice in Europe. Price justification bills, Quincy said, are being explored around the country.

3. Increase payer’s ability to negotiate. Medicare should be allowed to negotiate on drug prices with manufacturers. She also suggested that private health payers should band together to negotiate. In case of a single manufacturer, however, state-set limits on drug prices would be the path to follow.

Quincy said that while the general population may not understand the nuances of these policies, they do expect changes that would impact the bottom line.

See more at: http://www.ajmc.com/newsroom/fight-with-or-adapt-to-the-rising-drug-prices-economists-investigate-at-the-academyhealth-policy-conference#sthash.KHMA3NUj.dpuf

Thursday, February 18, 2016

Reference Pricing: "Net" Invoice Cost for Top Selling Generic and Brand Prescription Drugs (Volume 106)

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It's impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

-- Tip --

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Tuesday, February 16, 2016

PBM Tools Play Key Role in Managing Specialty Drug Costs

The increasing utilization and costs of specialty drugs will have a substantial impact on overall health care costs during the next decade.

Pharmacy benefit manager (PBM) tools that have successfully controlled costs in the traditional small-molecule drug categories will be critical to manage the increasing costs and requirements of the specialty drug category, according to a study published by sPCMA, a division of the Pharmaceutical Care Management Association.

Financial Impact of Specialty Drugs: Current and Projected
In 2014, more than 500,000 Americans filled prescriptions with a value of at least $50,000. This data represents a 63% increase from 2013.

Specialty drugs, primarily biologic agents—such as adalimumab (Humira), sofosbuvir (Sovaldi), and glatiramer (Copaxone)—that treat inflammatory conditions, hepatitis C, and multiple sclerosis (respectively), among others, increasingly account for a significant proportion of overall health care spending.

It’s been estimated that by 2020, 9 of the 10 best-selling drugs (by revenue) will be specialty drugs that treat conditions such as those illustrated in Figure 1. The estimates also indicated that specialty drug spending could reach $400 billion, or 9.1% of national health spending.

However, revised estimates point to the increasing prevalence of biosimilars in the market. Biosimilars are anticipated to curtail the overall biologic market value growth by reducing specialty drug spending to $262 billion by 2019, according to sPCMA.

Specialty benefit design and management tools employed by PBMs will also play a significant role in controlling specialty drug spending, as well as ensuring optimal patient care and support.

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Specialty Benefit Design and Management
Specialty drugs frequently have unique shipping and storage needs, as a result specialty pharmacies are better equipped to procure, store, and dispense these treatments than traditional retail pharmacies. Furthermore, pharmacists and personnel at specialty pharmacies provide patient education and clinical support beyond the capabilities of a retail pharmacy.

The tools in the PBM arsenal are critical to ensure appropriate care for patients needing specialty drugs while managing the often extraordinary costs. A brief sampling of key tools follows:
  • Formulary management: Effective use of formularies can minimize overall medical costs, improve patient access to more affordable care, and provide patients improved quality of life.
  • Access and utilization management: Drug utilization review, prior authorization, step therapy, quantity or dose limits, and comparative effectiveness reviews can limit a patient’s exposure to inappropriate drugs and lower the high cost of treatment by favoring clinically effective, lower price products.
  • Adherence and compliance: PBMs use these programs to improve patient outcomes and reduce the overall cost of care.
  • Site of care optimization: Hospital outpatient is one of the most costly settings for the infusion of specialty injectable products.
  • Alternative sites of care: Site-of-care management, such as strategies to direct patients to more convenient and less costly sites of service, are critical and can save between 12% and 34% percent — up to $1.7 billion nationally per year.
  • Preferred specialty pharmacy networks: PBMs optimize drug distribution via specialty pharmacy networks to reduce inappropriate utilization, improve patient adherence, improve clinical outcomes, and reduce non-drug medical costs.
Summary
Comprehensive management approaches that monitor and balance patient care outcomes and costs will help PBMs ensure that new, innovative medications are readily available and affordable to the patients who need them most.

See more at http://www.ajpb.com/articles/pharmacy-benefit-manager-tools-play-key-role-in-managing-specialty-drug-costs.

Thursday, February 11, 2016

Reference Pricing: "Net" Invoice Cost for Top Selling Generic and Brand Prescription Drugs (Volume 105)

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It's impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

-- Tip --

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Wednesday, February 10, 2016

Hospitals launch specialty pharmacies to curb drug costs

With specialty drug spending soaring 60% in the past five years, large health systems have jumped into the specialty pharmacy business to assert some control over those costs by dispensing the drugs to their patients and covered employees.

Health systems say those pharmacies help them better manage outpatient drug costs. A growing number of insurance contracts and Medicare initiatives tie payments to quality metrics that reach beyond hospital stays to hold providers accountable for patients' total medical costs, including drugs.

It's also a robust business for those systems that can successfully negotiate with manufacturers and health plans so they can compete with the bigger players.

“It you want us to be responsible for the cost of care, allow us to be able to care comprehensively for these patients,” said Dick Schirber, a spokesman for ExceleraRx Corp., a for-profit specialty pharmacy services company owned by six health systems. Comprehensive care, Schirber said, includes managing the very expensive prescriptions that patients take at home for cancer or chronic diseases, so that providers have more control over waste as well as complications.

ExceleraRx provides services to system-owned specialty pharmacies, such as negotiating with drugmakers and handling data reporting.

Phoenix-based Banner Health started its own specialty pharmacy last year, taking its business away from Premier, which acquired Commcare Specialty Pharmacy in 2010 for $35.9 million. Banner employees enrolled in the system's health plan were the pharmacy's first customers.

“For everyone, everywhere, the pharmacy expense is increasing,” said Pam Nenaber, Banner's CEO of pharmaceutical operations.

Banner Health hired three clinical pharmacists, three patient advocates and three staff members to support operations. The system also spent $1 million on a drug-dispensing robot for the specialty pharmacy's new home-delivery service. The robot fills pill bottles, which are verified by a pharmacist before being shipped. Clinical pharmacists also talk to patients at home to answer prescription questions.

In the first year, Banner shaved about 1% off its specialty drug spending for about 1,200 workers and their families covered by the system's employee health plan.

Health systems that own specialty pharmacies argue they can do a better job overseeing the use of the drugs they dispense. That's because their pharmacies can easily access medical records, laboratory results and physician notes, allowing pharmacists to closely monitor the effectiveness of the drugs prescribed and react quickly when something goes wrong or patients need help.

“They know if the patient is getting the value for the high-cost drug,” said Steven Rough, director of pharmacy for the University of Wisconsin Hospital and Clinics, which began handling transplant drugs in 2006 and expanded its specialty pharmacy in 2011.

Launching a specialty pharmacy does not require significant capital investment, and the high prices of the drugs—even sold at slim margins—make it possible to quickly see a return on that investment.

“It's a quite viable business,” said Scott Knoer, chief pharmacy officer at the Cleveland Clinic, which opened its specialty pharmacy roughly a year ago, and advises other systems to do the same. “Get on it and get on it fast,” he said.

That's true even as the Ohio health system expands its operations. The pharmacy is hiring more staff because the volume of prescriptions has increased about 10% a month. It now employs 25 workers, and that number is expected to reach 66 employees within three years.

New drugs last year boosted spending for specialty pharmaceuticals 25% over the prior year, IMS Health reported in April. Specialty drugs to treat diseases such as cancer, multiple sclerosis and hepatitis C now account for one-third of drug spending. Sovaldi and other new treatments for hepatitis C boosted spending by $12.3 billion, IMS said.

Pharmaceuticals still account for just 10% of U.S. healthcare spending, but a 12.3% surge in 2014—including $12.6 billion spent on new specialty drugs to treat hepatitis C—contributed to the year's uptick from the record-slow health spending that started with the Great Recession.

That growth makes dispensing specialty drugs an increasingly important piece of healthcare delivery, as well as an attractive business line, said John Ransom, a managing director of healthcare research at Raymond James. “It's riding the wave of where the innovation is,” he said.

But systems will face fierce competition as they try to ride that wave, Ransom said. “It can be a tough business.”

They will have to vie with national pharmacies like CVS Health, Express Scripts and Diplomat Pharmacy to be included in health insurance networks. CVS and Express Scripts also own pharmacy benefit-management companies, so they “have a vested interest in limiting the network of specialty pharmacies because they are specialty pharmacies,” Ransom said.

Pharmaceutical manufacturers also limit shipping of some of their drugs to a handful of pharmacies, in what are called limited-distribution networks.

Getting a spot in drug manufacturers' limited networks requires intense negotiation, and the capacity to report quality and use data back to drugmakers.

ExceleraRx, launched in 2012 with investment from Minneapolis-based Fairview Health Services, helps its owners and clients with those tasks. Englewood, Colo.-based Catholic Health Initiatives, which opened its own specialty pharmacies in Kentucky and Nebraska last year, invested in ExceleraRx to “supercharge” the new business line, said Nick Barto, the health system's senior vice president for capital finance.

However, another danger for providers is that patients may begin to see them as “the organization that's providing the drugs that you can't afford,” said Benjamin Isgur, director of thought leadership at PriceWaterhouseCoopers' Health Research Institute.

But health system executives say they've hired staff to help patients identify discounts, coupons and other financial aid for drug costs not covered by insurance. And health systems can further market their independence from shareholders and the pharmaceutical industry.

Monday, February 8, 2016

PBMs Provide Policy Solutions to Reduce Rx Costs, Increase Competition

Testifying before Congress, Pharmaceutical Care Management Association (PCMA) President and CEO Mark Merritt outlined market-based policy solutions to help increase competition and lower prescription drug costs. The Committee is examining "methods and reasoning behind recent drug price increases" at a hearing titled, "Developments in the Prescription Drug Market."
PCMA is the national association representing America's pharmacy benefit managers (PBMs).  PBMs administer prescription drug plans for more than 266 million Americans who have health insurance from a variety of sponsors including: commercial health plans, self-insured employer plans, union plans, Medicare Part D plans, the Federal Employees Health Benefits Program (FEHBP), state government employee plans, managed Medicaid plans, and others.
PBMs are projected to save employers, unions, government programs, and consumers $654 billion—up to 30 percent—on drug benefit costs over the next decade according to new research.  PBMs reduce drug costs by:
  • Negotiating rebates from drug manufacturers.
  • Negotiating discounts from drugstores.
  • Offering more affordable pharmacy channels.
  • Encouraging use of generics and more affordable brand medications.
  • Managing high-cost specialty medications.
  • Reducing waste and improving adherence.
"The pricing tactics discussed today are just one piece of a much larger puzzle. The key to reducing costs is through competition. The challenge is we need more of it," said PCMA President and CEO Mark Merritt. "There is also a growing use of bait-and-switch copay assistance marketing programs that encourage patients to ignore generics and start on more expensive brand drugs." 
Unlike programs for the poor and uninsured, copay offset programs are designed to encourage insured patients to bypass less expensive drugs for higher cost branded drugs.  Such practices are considered illegal kickbacks in federal programs and have long been under scrutiny by the Health and Human Services Office of Inspector General (OIG).
PCMA outlined several potential solutions for high drug prices that policymakers could consider, including:
Tyrone's Comment:
There is no mention by PCMA (a lobbying arm of legacy PBMs) to cut PBM service costs by eliminating the hidden cash flows from which traditional PBMs hugely profit. The focus is seemingly always "high drug cost" which is somewhat misleading.  A pharmacy benefit is inherently expensive, but even more so when PBMs drive incremental revenue through arbitrage. The solutions outlined below by PCMA are all self-serving and here's why.
  • Accelerating FDA approvals of me-too brands against drugs that face no competition. Puts traditional PBMs in a better negotiating position for larger rebates.
  • Accelerating FDA approvals of generics to compete with off-patent brands that face no competition. Generic drugs provide traditional PBMs higher gross margins, compared to brand drugs, and are more likely to be refilled (more volume) by patients.
  • Creating a government "watch list" of all the off-patent brands so potential acquirers are aware that policymakers can monitor these situations. This is related to Martin Shkreli and is nothing more than an attempt to curry favor with politicians and to divert attention away from the real issue; the lack of transparency traditional PBMs provide.
  • Making copay coupons an illegal kickback for all insurance that receives any federal subsidy. Pharmaceutical manufacturers often use co-pay coupons to skirt PBM formulary decisions especially when these decisions don't favor (i.e. tier 3 or non-formulary) the manufacturer. Traditional PBMs want to protect rebate dollars from those Tier 1 and Tier 2 brands which pay said rebates. 

Friday, February 5, 2016

NCPA to Congress: Scrutinize PBM Corporations as Part of Drug Cost Review

Increased transparency into the business practices and potential conflicts of interests of pharmacy benefit manager (PBM) corporations could provide tangible benefits to payers, patients and pharmacists, the National Community Pharmacists Association (NCPA) said in comments submitted to the House Committee on Oversight and Government Reform, which held a hearing today on the prescription drug market.
"The current business climate seems to be one in which market power is increasingly concentrated in an ever-shrinking number of corporate entities," NCPA said in its comments. "In particular, the overly concentrated and largely unregulated PBM industry exerts immense influence over how prescription drugs are accessed by the majority of Americans.

Given the fact that the federal government is the largest single payer of health care in the United States, it makes financial sense for Congress to demand increased transparency into this aspect of the prescription drug marketplace in order to identify potential savings."
NCPA raised the following issues for the attention of committee members and staff:
Source: 2014 ERISA Advisory Council
  • The powerful PBM market is concentrated and dominated by three large corporations that each reap staggering annual revenues and are not subject to industry-wide regulation.  
  • The lack of transparency allows PBM corporations to collect lucrative rebates from pharmaceutical manufacturers and "mark up" the cost of medication, charging the health plan more than the pharmacy is reimbursed. Increased PBM transparency may provide plan sponsors with a greater ability to negotiate more competitive contracts with these vendors in the first place, reducing costs.
  • Independent community pharmacies must agree to "take it or leave it" contracts from PBMs to continue serving longstanding patients, due to the large corporations' disproportionate market power.
  • Community pharmacists have zero insight or transparency into generic drug reimbursement rates and routinely incur losses when those rates do not cover pharmacy acquisition and dispensing costs, jeopardizing patient access to community pharmacies and prescription drugs.
The National Community Pharmacists Association (NCPA®) represents the interests of America's community pharmacists, including the owners of more than 22,000 independent community pharmacies. Together they represent an $81.4 billion health care marketplace and employ more than 314,000 individuals on a full or part-time basis. 
To learn more, go to www.ncpanet.org.

Thursday, February 4, 2016

Reference Pricing: "Net" Invoice Cost for Top Selling Generic and Brand Prescription Drugs (Volume 104)

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It's impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

-- Tip --

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Tuesday, February 2, 2016

New York requires PBM contracts to include dispute resolution provisions

Image result for legislationOn Dec. 11, New York State Governor Andrew Cuomo signed Senate Bill 3346-B, requiring contracts between pharmacy benefit managers (PBMs) and pharmacies (or pharmacies’ contracting agents) to include a mechanism for appeals for contract disputes relating to multi-source generic drug pricing.

Pharmacy benefit management contracts must include the following provisions regarding appeals:

The right for a pharmacy to appeal for 30 days following an initial claim submitted for payment;
a telephone number through which a network pharmacy may contact the PBM for the purpose of filing an appeal and an electronic mail address of the individual who is responsible for processing appeals;
  • The PBM must send an email acknowledging receipt of the appeal and respond in an email to the pharmacy (and/or the pharmacy’s contracting agent) filing the appeal within seven business days indicating its determination. If the appeal is determined to be valid, the maximum allowable cost for the drug shall be adjusted for the appealing pharmacy effective as of the date of the original claim for payment. The PBM must require the appealing pharmacy to reverse and rebill the claim in question in order to obtain the corrected reimbursement;
  • If an update to the maximum allowable cost is warranted, the PBM or covered entity shall adjust the maximum allowable cost of the drug effective for all similarly situated pharmacies in its network in NY State on the date the appeal was determined to be valid; and
  • If an appeal is denied, the PBM must identify the national drug code of a therapeutically equivalent drug, as determined by the federal Food and Drug Administration, that is available for purchase by pharmacies in NY State from wholesalers registered under NY law at a price which is equal to or less than the maximum allowable cost for that drug as determined by the PBM.
Tyrone's Comment -

From a plan sponsor perspective, this legislation is important because it sheds a bright light on spreads or the difference in what PBMs charge plan sponsors to fill prescriptions and what they in turn pay pharmacies to dispense those prescriptions. This difference often leads to greater profits for the PBM at the expense of plan sponsors. The spread is a prime contributor to why one pharmacy may charge your plan very little and another may charge very much for the same generic medication.
  1. Contracted rate is the reimbursement rate that a specific pharmacy or pharmacy chain contractually agrees to accept for processing prescription drug claims on behalf of a specific PBM 
  2. Effective rate is the actual blended performance rate of discount for the AWP, accounting for differences in reimbursement rate among individual pharmacies and the net effect of drugs that process at a customary level (the pharmacy’s retail price of a drug), which may be lower than the negotiated AWP discount
According to reporting by Fortune magazine reporter Katherine Eban, Meridian Health System audited its spending on employee medications to learn the scope of spread pricing. For the antibiotic amoxicillin, Meridian was billed $92.53 when an employee filled the prescription, but its PBM paid only $26.91 to the pharmacy to fill the same prescription. That amounted to a spread of $65.62 for only one prescription.

In another instance, Meridian was billed $26.87 for a prescription of azithromycin. The PBM paid the pharmacy $5.19 to dispense the prescription, creating a spread of $21.68. While the PBM continually promised savings, Meridian paid $1.3 million in unnecessary prescription benefits costs to this vendor due to the spread, according to Eban.
Senate Bill 3346-B will be codified as NY Public Health Law § 280–A and takes effect March 10, 2016.

By  Serj Mooradian